Sizing up the post-recession job market

Six and half years later, nearly everything about the job market is different. When the Great Recession hit in December 2007, 138.4 million people were working at U.S. businesses, nonprofits and government agencies. By February 2010, that figure had cratered to 129.7 million. Fifty-one months later, the economy is back to 138.5 million jobs, the government said Friday. Consider what's changed.

The economic storms of the past several years have driven many to the sidelines. Just 62.8 percent of those 16 and older are part of the workforce, which includes people who either have a job or are looking for one. That's the lowest level in 35 years.

Economists estimate that about half the decline is related to demographics: The leading edge of the baby boom generation has started to retire, a trend that will likely intensify in coming years. And Americans 24 and younger are more likely to be in school than they were 6 ½ years ago.

But much of the exodus has occurred because more Americans have become discouraged about their job prospects. The government doesn't count people as unemployed if they aren't actively looking for work. Nearly 700,000 people were classified by the government as "discouraged" in May. That's still about twice the total when the recession began.

Prime-age workers

Economists are worried about an exodus among those ages 25-54. Those are prime working years, when employees typically start to reap the wage gains that come from greater skills and experience. Yet the percentage of those ages 25 to 54 in the workforce fell to 80.8 percent in May, down from 83.1 percent in December 2007. In October, the figure fell to 80.6 percent, the lowest since 1984, when women began entering the workforce in greater numbers. The biggest drivers of the decline, according to researchers at the Federal Reserve Bank of Atlanta: A jump in the number of people receiving government disability aid and an increase in those who have left the workforce for schooling or training.

Will they return?

All this matters because it sets up a big question: How many of those people will resume their job searches as the economy strengthens? If many people flood back, it would likely keep wages low. But if most don't resume looking, pay could climb because of a shortage of qualified job-seekers. If sustained, widespread pay raises could fan inflation. That could eventually force the Fed to raise interest rates to prevent an inflationary spiral.

Some economists think retirements will offset the return of those who'd grown discouraged about the job market. Americans who have been receiving education or training will likely return to the workforce once the economy picks up. Those on disability are much less likely to do so, the Atlanta Fed said. The federal disability rolls jumped from 7.1 million in 2007 to 8.9 million last year. But the gains slowed in 2013.

Lower-paying jobs

Job-seekers now have fewer higher-paying jobs to choose from than in 2007, while lower-paying ones have replaced them. There are about 2 million more jobs in low-paying industries such as restaurants, temporary help agencies and retail than at the start of the recession, according to the National Employment Law Project. Meanwhile, middle- and high-wage industries have shed nearly 900,000 jobs each.

Fewer government jobs

A big reason it's taken so long for the workforce to return to its pre-recession level is that governments continued cutting jobs even after businesses started to hire. Property taxes are a key source of revenue for localities, and the collapse of home prices forced cuts in school systems. There are 500,000 fewer government jobs now than when the recession began. About half those losses have been teachers and other local education jobs.

Part-timers, temps

Compared with when the recession began, nearly 2.5 million more people are working part time. And there are still 2.9 million fewer people working full-time jobs. That means a chunk of the new jobs don't pay as well as those they replaced. But about 10 percent of jobs added since February 2010, when employers started hiring again, have been at temp agencies. Nearly 2.1 percent of all jobs now are at temp agencies, a record high. Temp jobs typically pay less and offer fewer benefits.